When is interest applied by Revenue?
If you do not pay Value-Added Tax (VAT) on time, interest is charged on a daily basis from the date the payment is due until the amount outstanding is paid.
Where a VAT refund has been overclaimed, you will have to pay interest on the overclaimed amount. Interest is payable from the date the overpayment was made to you.
The rate of interest is 0.0274% per day or part of a day.
Interest on underpayment in direct debit scheme
Revenue can charge interest on any balance that is outstanding at the end of your accounting year.
The date Revenue uses to calculate the interest will depend on the percentage of the annual liability outstanding.
If you have paid 80% or more, Revenue will charge the interest from the due date of your end of year VAT 3 return, until the amount outstanding is paid.
If you have paid less than 80%, Revenue will back date the interest to a date which is six months prior to the final date for filing your annual VAT return.
- Example 1
John is on direct debit and pays €5,000 per month. His accounting period ends on 31 December.
He files his VAT return on 19 January, his annual liability is €66,000. He has paid over 80% of the actual liability for that accounting period.
He does not pay the remaining outstanding amount of €6,000 until 20 March.
He is charged interest on €6,000 from 19 January to 20 March at a daily rate of .0274%.
- Example 2
Kate is on direct debit and pays €5,000 per month. Her accounting period ends on 31 December.
She files her VAT return on 19 January, her annual liability is €80,000. She has not paid 80% of the actual liability for that accounting period.
She does not pay the remaining outstanding amount of €20,000 until 20 March.
She is charged interest on €20,000 from 19 July to 20 March at a daily rate of .0274%.
Interest on estimates and assessments
In a situation where Revenue estimates your VAT liability, interest on VAT unpaid is calculated at a daily rate from the date the VAT was payable.
Where Revenue issues an assessment, interest is payable at a daily rate from the date the original VAT return was due.
However, where the assessment includes VAT due in respect of more than one taxable period, interest is calculated from the last tax period included in that assessment.
This is the case even where an appeal is lodged against the assessment.